Stanley Black & Decker (SWK) earnings release for the 2nd quarter of their 2021 fiscal year
Category: Stanley Black & Decker (SWK)
Date: 10 August 2021 Stock Price of Stanley Black & Decker (SWK): $195.60 Market Capital of Stanley Black & Decker: $31.9 billion We take a look at the 2nd quarter earnings release of their 2021 fiscal year of Stanley Black & Decker a supplier of hand tools, power tools and other related accessories. For the quarter the group reported net sales of $4.3 billion and net income of $454.7 million.
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Stanley Black & Decker's CEO, James M. Loree - We delivered outstanding performance in the second quarter, our 33% organic growth was fueled by a robust stream of innovation, positive secular trends and strong markets while leveraging margin resiliency to deliver significant gross and operating margin expansion and record adjusted EPS"
About Stanley Black & Decker
In 1843, Frederick Stanley started a small shop in New Britain, Connecticut, to manufacture bolts, hinges and other hardware of high quality from wrought iron. In 1910, Duncan Black and Alonzo Decker started their shop in Baltimore, Maryland, and six years later obtained the world’s first patent for a portable power tool. Over the years the two companies amassed an unparalleled family of iconic brands and trusted products. In 2010, they came together as Stanley Black & Decker, a leading global diversified industrial. Known for superior quality, continual innovation and rigorous operational discipline, we remain driven by a passion for excellence and a commitment to serve the builders, makers and protectors of the world.
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, electronic security solutions, healthcare solutions, engineered fastening systems, and more
Stanley Black & Decker, an S&P 500 company, is a diversified global provider of hand tools, power tools and related accessories, electronic security solutions, healthcare solutions, engineered fastening systems, and more
Overview of Stanley Black & Decker's 2nd quarter 2021 earnings report
- 2Q'21 Revenues Totaled $4.3 Billion, Up 37% Versus Prior Year With All Segments Growing Double Digits And Contributing To 33% Organic Growth
- 2Q'21 Gross Margin Was 35.9%; Excluding Charges, Up 240 Basis Points Versus Prior Year
- 2Q'21 Operating Margin Was 14.9%; Excluding Charges 2Q'21 Operating Margin Was 15.5%, Up 270 Basis Points Versus Prior Year Driven By Volume, Price, Innovation And Margin Resiliency
- 2Q'21 Diluted GAAP EPS Was $2.81; Excluding Charges, 2Q'21 Diluted EPS Was $3.08, Up 93% Versus Prior Year
- 2Q'21 Free Cash Flow Was $339 Million, Up 28% Versus Prior Year
- Raising 2021 Diluted GAAP EPS Guidance Range To $10.80 - $11.20 (From $10.15 - $10.55); Raising Adjusted EPS To $11.35 - $11.65 (From $10.70 - $11.00); Reiterating Free Cash Flow To Approximate Net Income
- Quarterly Common Stock Dividend Increased 13% To $0.79 Per Share, As Recently Announced
2Q'21 Key Points:
- Net sales for the quarter were $4.3 billion, up 37% versus prior year as volume (+31%), price (+2%) and currency (+5%) were partially offset by divestitures (-1%).
- The gross margin for the quarter was 35.9%. Excluding charges, gross margin was up 240 basis points from prior year as volume, price, productivity and mix benefits from innovation were partially offset by commodity inflation and higher expedited transit costs required to meet strong demand.
- SG&A expenses were 21.0% of sales. Excluding charges, SG&A expenses were 20.4% of sales compared to 20.7% in 2Q'20, as strong operating leverage was partially offset by investments in growth initiatives across the businesses.
- The tax rate was 14.0%. Excluding charges, tax rate was 14.8% versus 15.0% in 2Q'20.
- Working capital turns for the quarter were 6.7, up 1.1 turns versus prior year, as the organization leveraged the SBD Operating Model and the strong revenue performance to more than offset the impact from inventory investments to serve strong customer demand.
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Stanley Black & Deckers management commentary on their 2nd quarter 2021 earnings report
NEW BRITAIN, Conn., July 27, 2021 /PRNewswire/ -- Stanley Black & Decker (NYSE: SWK) today announced second quarter 2021 financial results.
Stanley Black & Decker's CEO, James M. Loree, commented, "We delivered outstanding performance in the second quarter, our 33% organic growth was fueled by a robust stream of innovation, positive secular trends and strong markets while leveraging margin resiliency to deliver significant gross and operating margin expansion and record adjusted EPS. I want to thank my 56,000 colleagues for their passion, dedication and performance as they continue to successfully serve our customers while navigating rapidly growing markets and global supply chain dynamics.
"We enter the second half of 2021 with positive momentum and a portfolio that is well positioned to benefit from the key trends that are driving our growth: the consumer reconnection with the home and garden, eCommerce, electrification and health and safety. Additionally, we are in negotiations regarding exercising our option to acquire the remaining stake in MTD and continue to believe that MTD has the potential to create a multi-year runway for growth and significant EPS and cash flow accretion.
"We are excited for the future prospects for growth as our organization is operating with agility and leveraging the SBD Operating Model to pursue our vision: to become known as one of the world's leading innovators, deliver top-quartile performance and elevate our commitment to corporate social responsibility (ESG)."
Stanley Black & Decker's CEO, James M. Loree, commented, "We delivered outstanding performance in the second quarter, our 33% organic growth was fueled by a robust stream of innovation, positive secular trends and strong markets while leveraging margin resiliency to deliver significant gross and operating margin expansion and record adjusted EPS. I want to thank my 56,000 colleagues for their passion, dedication and performance as they continue to successfully serve our customers while navigating rapidly growing markets and global supply chain dynamics.
"We enter the second half of 2021 with positive momentum and a portfolio that is well positioned to benefit from the key trends that are driving our growth: the consumer reconnection with the home and garden, eCommerce, electrification and health and safety. Additionally, we are in negotiations regarding exercising our option to acquire the remaining stake in MTD and continue to believe that MTD has the potential to create a multi-year runway for growth and significant EPS and cash flow accretion.
"We are excited for the future prospects for growth as our organization is operating with agility and leveraging the SBD Operating Model to pursue our vision: to become known as one of the world's leading innovators, deliver top-quartile performance and elevate our commitment to corporate social responsibility (ESG)."
Updated 2021 Outlook
Management is raising its 2021 EPS outlook to $10.80 - $11.20 from $10.15 - $10.55 on a GAAP basis, and to $11.35 - $11.65 from $10.70 - $11.00 on an adjusted basis. The Company is also reiterating that free cash flow is expected to approximate net income. The primary factors for the increased EPS guidance include stronger organic growth and incremental pricing actions, which are expected to be partially offset by higher expedited transit costs in Tools & Storage and an increase in commodity inflation. Management will discuss its 2021 planning assumptions in more detail on today's earnings call.
Donald Allan Jr., President and CFO, commented, "We delivered outstanding financial performance in the first half with strong momentum across each of our businesses. Tools & Storage posted 43% organic growth while Industrial and Security both achieved high single digit organic growth. We leveraged our margin resiliency efforts to deliver 510 basis points of operating margin expansion, record adjusted earnings per share and strong free cash flow generation.
"Our revised 2021 guidance calls for organic revenue growth of 16% - 18% and, at the midpoint, adjusted EPS expansion of 27% versus prior year and 37% versus 2019. The updated outlook reflects our strong first half performance as well as improved visibility to demand in Tools & Storage. We continue to make investments to support our growth catalysts, increase capacity in our supply chain and drive our margin resiliency initiatives.
"The organization remains focused on day-to-day execution, implementing price increases and margin resiliency programs in response to commodity inflation, and operating in accordance with our SBD Operating Model. We believe the Company is well-positioned to deliver above-market organic growth with operating leverage, strong free cash flow generation and top-quartile shareholder returns over the long-term."
Management is raising its 2021 EPS outlook to $10.80 - $11.20 from $10.15 - $10.55 on a GAAP basis, and to $11.35 - $11.65 from $10.70 - $11.00 on an adjusted basis. The Company is also reiterating that free cash flow is expected to approximate net income. The primary factors for the increased EPS guidance include stronger organic growth and incremental pricing actions, which are expected to be partially offset by higher expedited transit costs in Tools & Storage and an increase in commodity inflation. Management will discuss its 2021 planning assumptions in more detail on today's earnings call.
Donald Allan Jr., President and CFO, commented, "We delivered outstanding financial performance in the first half with strong momentum across each of our businesses. Tools & Storage posted 43% organic growth while Industrial and Security both achieved high single digit organic growth. We leveraged our margin resiliency efforts to deliver 510 basis points of operating margin expansion, record adjusted earnings per share and strong free cash flow generation.
"Our revised 2021 guidance calls for organic revenue growth of 16% - 18% and, at the midpoint, adjusted EPS expansion of 27% versus prior year and 37% versus 2019. The updated outlook reflects our strong first half performance as well as improved visibility to demand in Tools & Storage. We continue to make investments to support our growth catalysts, increase capacity in our supply chain and drive our margin resiliency initiatives.
"The organization remains focused on day-to-day execution, implementing price increases and margin resiliency programs in response to commodity inflation, and operating in accordance with our SBD Operating Model. We believe the Company is well-positioned to deliver above-market organic growth with operating leverage, strong free cash flow generation and top-quartile shareholder returns over the long-term."
Stanley Black & Decker (SWK) stock price chart over the last 5 years
The image below shows the stock price history of Stanley Black & Decker (NYSE: SWK) over the last 5 years. And it's been a amazing time for Stanley Black & Decker. Over the 5 year period the stock of Stanley Black & Decker increased by 59.2%. Pretty decent returns provided to SWK investors.
The stock of Stanley Black & Decker is trading at closer to its 52 week high than it is to its 52 week low which to us its an indication that the short term sentiment and momentum of Stanley Black & Decker is positive at this point in time,
The stock of Stanley Black & Decker is trading at closer to its 52 week high than it is to its 52 week low which to us its an indication that the short term sentiment and momentum of Stanley Black & Decker is positive at this point in time,
Stanley Black & Decker (SWK) latest stock valuation
So based on the 2nd quarter 2021 earnings report of Stanley Black & Decker (NYSE: SWK) what do we value Stanley Black & Decker stock at? Based on their latest earnings report our valuation models provide a target price (full value price) for Stanley Black & Decker stock at $193.10 a stock. We therefore believe the stock of Stanley Black & Decker is fully valued.
We usually recommend that long term fundamental or value investors buy into a stock at least 10% below our target (full value) price, which in this case is $193.10 We therefore believe a good entry point into Stanley Black & Decker is $173.80 or below.
We expect the stock of Stanley Black & Decker to trade in a narrow range in coming weeks and months as its currently trading at close to its target price.
We usually recommend that long term fundamental or value investors buy into a stock at least 10% below our target (full value) price, which in this case is $193.10 We therefore believe a good entry point into Stanley Black & Decker is $173.80 or below.
We expect the stock of Stanley Black & Decker to trade in a narrow range in coming weeks and months as its currently trading at close to its target price.
Next earnings release of Stanley Black & Decker
It is expected that Stanley Black & Decker will release their 3rd quarter 2021 earnings report in late October 2021